IP interconnection issues

Transcription

1 Regulatory and policy challenges of next-generation access IP interconnection issues 6 November 0 Michael Kende

2 Introduction Last year marked the 5th anniversary of the commercialisation of the Internet backbone since then traffic has grown by many orders of magnitude, with an increasing amount of premium content, including video the Internet ecosystem has evolved from a simple, hierarchical structure to a dynamic web of interconnections among players the one constant is that interconnection arrangements continue to be agreed through commercial negotiations, rather than regulation Two recent events indicate the changes, and challenges, that policymakers will face in relation to IP interconnection the Level Global Crossing merger approval the Level Comcast interconnection dispute At the same time, these changes highlight a significant development opportunity for a number of countries to influence domestic Internet usage

3 Recent events involving Level highlight changes in the Internet Level Global Crossing merger In the late 990s horizontal mergers between Internet backbones received significant scrutiny in 998, MCI had to divest its Internet backbone to merge with WorldCom in 000, the MCI Sprint merger was blocked by the US DoJ Level recently closed its acquisition of Global Crossing this merger involved the number and number backbones, resulting in 55% market share (source: Renesys) the merger was approved in six months with no apparent concerns Level Comcast interconnection dispute The dispute arose when Comcast began to charge Level to deliver video content Level is becoming a CDN and won a contract to deliver Netflix video content Comcast is the USA s largest and is becoming one of the largest backbones Netflix is responsible for approximately 0% of peak broadband traffic The dispute highlights key questions: is it a standard peering dispute based on traffic imbalance? is it a net neutrality violation, with Comcast increasing a competitor s cost? These events highlight the significant evolution of the Internet hierarchy and corresponding challenges and opportunities for policymakers and regulators

4 4 The commercial Internet is relatively young The National Science Foundation Network (NSFNET) backbone service was abandoned in favour of the commercial Internet on 5 April 995 the NSFNET was used by regional networks to exchange traffic in its place, four network access points (NAPs) were designated for traffic exchange interconnection was not regulated commercial arrangements known as peering and transit were negotiated between providers The Internet was very different on that day Netscape had just been introduced the DOCSIS standard had not yet been released the NSFNET backbone was just 45Mbit/s

5 Peering is a bilateral arrangement between peers for the exchange of customer traffic The backbones may all cover the same geographical area and compete for the same customers sends traffic from and 4 to for termination with and (and vice versa) 5 End-user Content provider and aggregator End user 4 Internet access Transit Peering

6 6 that involves a number of costs Peering is negotiated commercially between two providers to exchange traffic between their customers (s, content providers, enterprises and end users) s will not deliver traffic from one peer to another will not convey traffic from to as a result, many peering connections are needed Peering is often, but not always, settlement-free when the costs dedicated to a peering arrangement are roughly the same, (e.g. transport mileage and traffic ratios are roughly balanced) the peers may not pay settlements otherwise, an alternative might be paid peering s dedicate resources to each peering connection ports in routers capacity throughout the network to the point of interconnection setup and maintenance costs Peering

7 Transit is a customer relationship that gives the buyer access to the entire Internet 7 Through this transit relationship will deliver all of s traffic in both directions End-user Content provider and aggregator End user 4 Internet access Transit Peering

8 Peering is a wholesale input into the sale of transit Transit costs Transit revenues Number of peers A backbone s position evolves as it grows from position (no peering), it increasingly qualifies for peering (as its geographical coverage expands, it carries more traffic, etc.) and so reduces its transit costs through position 4 (at right) at position 5, it has enough peering relationships to start becoming a net seller of transit services Peering and transit have different functions peering is a bilateral relationship to exchange customer traffic, while transit is a customer relationship offering access to the entire Internet while a customer only needs one transit arrangement to have Internet access, the provider needs multiple peering arrangements to offer transit service 8

9 Peering decisions are made primarily to avoid cost-shifting between peers Many providers have publicly available peering policies, detailing the conditions under which they will peer These policies typically have two relevant sections: network requirements refers to the geographical scope of the network, to ensure that both networks will be able to share the load of carrying traffic to all parts of the world peering requirements refers to the location of traffic exchange and the amount of traffic exchanged, again to ensure a fair balance of resources devoted to the peering relationship Many of these requirements are intended to prevent cost-shifting between peering partners in traffic exchange, to stop the customers of one partner effectively subsidising the delivery costs of the other 9

10 Traffic between peers is typically exchanged via hot-potato routeing End user 4 / 0 As a greater volume of traffic is sent back to the end user, the ratio of traffic exchanged will rise and will incur higher costs to carry content for s customers IXP IXP / Content provider which may be addressed using cold-potato routeing delivering traffic close to the end user. This reduces the distance over which the receiving backbone carries content, but does not necessarily eliminate the cost imbalance

11 The early Internet was a hierarchy with Internet backbones at the top All traffic passes through the backbone providers, which carry the traffic between the s End-user Content provider and aggregator NAP End user 4 Internet access Transit Peering It was in this context that regulators were concerned with horizontal mergers between the large backbones in the late 990s Source: Analysys Mason

12 Millions Penetration as % of HH PB per month (000s) In the past decade content traffic has grown due to consumer adoption of broadband Growth in broadband in the USA 00% 80 80% % 40% 0% 0 0% Q DSL Cable modem Residential FTTB Broadband FWA Broadband penetration The increase in broadband adoption and usage supported higherbandwidth services with lower latency The explosion of web-based devices such as tablets and smartphones has further fuelled this demand Consumer Internet traffic forecasts Web and File sharing Internet gaming Internet voice Internet video com. Internet video Internet video to TV to PC Peer-to-peer (PP) file sharing grew quickly as a means of exchanging content between users According to Sandvine, Netflix video alone accounts for almost 0% of download traffic during peak times Source: Analysys Mason Research Source: Cisco Visual Networking Index

13 and IP interconnection has evolved accordingly The early NAPs fell out of favour backbone providers used them for public peering; public switches congested NAP operators such as MCI WorldCom also competed with the other backbones, leading to concerns over neutrality Internet Exchange Points (IXPs) emerged in their place a wide variety of activities are possible (e.g. direct peering and sale of transit) these large data centres are open to all (including s and content providers) in the USA, these tend to be commercial but operated by neutral parties such as Equinix A wide variety of agreements were facilitated by these common locations secondary peering between s to exchange end-user traffic (esp. peer-to-peer) paid peering, for content providers to deliver content directly to s for distribution across their networks to end users s and content providers increasingly only buy partial transit from backbone providers (whereas they were previously entirely reliant on transit)

14 which means former transit customers increasingly bypass backbone providers Content provider and aggregator Representation of relationship between Internet players today Customers have reduced their reliance on backbones for connectivity IXP 4 End user End-user 4 Internet access Transit Partial transit Source: Analysys Mason Peering Secondary peering Paid peering

15 Content delivery networks (CDNs) deliver content to s, directly or indirectly 5 Regional Content Delivery Network Mobile operator Regional network A network B Content provider Aggregation and access Aggregation and access End user CDNs offer high-quality content delivery via a network of caching servers connected to s The largest third-party CDNs include Akamai and Limelight, while some large content providers are building their own CDNs to deliver their content Source: Analysys Mason

16 USD per Mbit/s The constraints on Internet backbones increasingly come from former customers As discussed, traditional backbone customers increasingly arrange connectivity at IXPs, at the expense of transit demand secondary peering between s paid peering between content providers and s The 009 Annual Report of the ATLAS Internet Observatory highlighted other options for s and content providers content delivery network: according to Atlas, CDNs represent close to 0% of Internet traffic Self-supply: Google has largely built its own CDN, and accounts for 6% of all Internet traffic Growth: Comcast quickly grew from a traditional MSO to the sixth-largest carrier of traffic by volume Median transit prices per Mbit/s Median transit prices have fallen significantly, reflecting the increased demand and supply options available to the entire Internet ecosystem 6 Chicago Houston Los Angeles Miami New York San Francisco

17 Changes in the hierarchy explain the current events involving Level Horizontal mergers between backbones such as Level / Global Crossing are no longer of significant concern Instead, vertical relationships involving content and eyeballs will drive Internet issues in future, including the Level / Comcast issue in becoming a CDN with Netflix traffic, Level began to deliver five times as much traffic to Comcast as it received in becoming an Internet backbone, Comcast could appear to violate net neutrality by charging to deliver video content to its customers in this case the FCC declined to get involved, arguing that it was a peering dispute not a net neutrality issue More broadly, such disputes are likely arise more frequently in future should the value of content such as Google trump the cost of delivering traffic? can access providers monetise traffic delivery to fund NGA networks? as voice is added to data streams, will regulators be able to maintain a handsoff approach to IP interconnection? 7

18 kbit/s and the increasing importance to countries of having a strong IXP An IXP facilitates changes in the hierarchy it can significantly lower the cost of IP traffic exchange it can act as a hub for domestic and regional content the impact of AMS-IX in the Netherlands is noticeable in terms of bandwidth per capita (see right) Broadly speaking, two sets of factors affect the evolution of the IXP into a hub providers will look at the general business environment and costs of setting up and running a business providers look at sector policies (e.g. international liberalisation, licensing requirements and obligations) International Internet bandwidth per capita Australia USA Canada Germany France Singapore UK Netherlands Source: TeleGeography Global Internet Bandwidth

19 9 Contact details Michael Kende Partner Analysys Mason Limited 88 Connecticut Avenue NW Suite 00 Washington DC 0006, USA Tel: Fax